Does your residential construction or landscaping company perform home repairs, renovations, improvements, or alterations for projects of more than $1,000? Does the work (or the work of your subcontractors) involve installing swimming pools, building sheds or decks, roofing, or exterior painting? If you answered yes, you are likely required to register as a Home Improvement Contractor (“HIC”) with the Office of Consumer Affairs and Business Regulation (“OCABR”). For HICs that are required to register but fail to do so, the consequences can be devastating in the event they find themselves in a dispute with a homeowner.
In the early 1990s, the Massachusetts legislature enacted General Laws Chapter 142A, known as the Home Improvement Contractor Statute. The idea behind the Statute was to regulate the work of home improvement contractors and subcontractors involved in residential contracting.[1]
Under Chapter 142A, an HIC must do a number of things to comply with the Statute, including registering with the OCABR, using a contract that complies with the Statute, and paying small fees every two years. A portion of these fees is put toward a Guaranty Fund that was set up to compensate homeowners up to $10,000 for disputes with contractors.
For contractors or subcontractors who fall under Chapter 142A, the failure to register or to comply with the Statute’s many requirements can result in penalties and sanctions ranging from paying a disgruntled customer’s attorney fees, all the way to jail time. For these reasons, you need to know whether the law requires your business to register and how to make sure your construction and home improvement services satisfy the Statute.
Are You A Chapter 142A Contractor? Chapter 142A can be a bit confusing because it only lists those residential contractors that do not have to register as HICs, without clearly listing the ones that do.
For example, plumbers and electricians don’t have to register as HICs (though they are required to be separately licensed). Similarly, if you install central heating, air conditioning systems, or energy conservation devices, you do not have to register; nor do contractors hired on small jobs (less than $500) or those that work only part-time (meaning they earn less than $5,000 a year from their trade).
Additionally, Chapter 142A does not require the following contractors to register, provided they work “exclusively” in one of the following areas:
- landscaping;
- interior painting or wall covering;
- finished floor covering (including carpeting, vinyl floor covering, tile, non-structural hardwood);
- fencing;
- freestanding masonry walls (under 6 feet and non-retaining);
- above-ground swimming pool installation;
- shutter or awning installation;
- ground level patio installation (including flagstone, concrete, block and wood set directly into the ground); or
- asphalt and driveway installation.
On the other hand, if you work in one or more of the following areas, then your company probably falls under Chapter 142A and must register:
- below-ground swimming pool installation;
- masonry related to building/foundation work;
- carpentry including structural, decking, and trim;
- demolition;
- exterior painting;
- shed construction or installation; and/or
- stairs, exterior installation.
How To Avoid Violating Chapter 142A And Facing Stiff Penalties
If Chapter 142A applies to your business, you must be registered with OCABR, which issues certificates of registration to approved HIC applicants. Contractors must complete an HIC application and provide specific information about their area of expertise. In addition, each HIC applicant must pay a registration fee. The amount of your fee depends on how many people you employ:
- 1-3 employees ($100);
- 4-10 employees ($200);
- 11-30 employees ($300); and
- 30 + employees ($500).
Once you register, your HIC registration is good for two years, after which you will need to submit a renewal application. Although approval of your application is not automatic, the OCABR Director may deny or non-renew an application only if the applicant has done at least one of the following:
- made material omissions or misrepresentations of fact on the application (or on an application under the State Building Code for licensing as a construction supervisor);
- failed to pay either the registration fee or the payment to the Guaranty Fund;
- determined by the OCABR to have failed to perform contracts or performed contracts in an unworkmanlike manner or failed to complete contracts with no good cause or has engaged in fraud or bad faith with respect to such contracts; or
- failed to meet or has violated any of the requirements for registered contractors or subcontractors or has performed or is attempting to perform any prohibited act.
Another thing to consider is that the OCABR’s website allows potential customers to search the names of contractors and view past complaints. It also allows potential customers to see the number of times contractors have had to arbitrate disputes with homeowners, and to see if a contractor’s registration has been revoked, suspended or surrendered. Obviously, you do not want to show up on the OCABR’s naughty list.
Your Contracts Must Comply With Chapter 142A’s Requirements
As a Chapter 142A contractor, registration and paying your fees is just the beginning. An HIC must also make sure that its contracts with homeowners include a number of specific requirements and key words, a few of which are listed below.
First and foremost, every agreement between a homeowner and an HIC to perform residential contracting services for projects over $1,000.00 must be in writing. There are a number of other requirements and details that must be included on your contract in order to avoid violating the Statute. The following is just a partial list of the information that you must include in your contract with homeowners:
- the complete agreement between the owner and the contractor;
- full names, SSN’s, physical address (not PO box addresses), and registration number of the contractor;
- names of any salesperson who negotiated the contract;
- date the contract was executed by the parties;
- date of anticipated substantial completion;
- detailed description of the work to be done and the materials to be used;
- total amount agreed to be paid for the work;
- schedule of payments to be made under the contract and the amount of each payment stated in dollars;
- signatures of all parties;
- HIC registration number of the contractor or subcontractor;
- homeowner’s warranties under the Statute;
- description of all work permits needed and that it is the contractor’s responsibility – not the homeowner’s – to pull the permits; and
- notice to the homeowner that if she pulls her own permits, she will not be eligible for the Guaranty Fund provisions in the event of a dispute with the contractor.
Other Chapter 142A Violations
As you hopefully appreciate by now, Chapter 142A has a number of highly technical requirements that can trip up even well-intentioned contractors. But that’s not all — the Home Improvement Contractor Statute also specifically prohibits many other acts. Violations of Chapter 142A such as these could land you in hot water:
- abandoning or failing to perform any contract or project without justification;
- making a “false promise” to influence, persuade or induce the homeowner to enter into the contract procurement of a contract;
- publishing any advertisement relating to home construction or home improvements which does not contain your HIC registration number;
- publishing any advertisement that contains a false, deceptive, or misleading statement;
- violating any of the building laws of the Commonwealth; or
- running a residential contracting business in any name that is different from the one that you registered with as an HIC.
Chapter 142A Penalties
A registered HIC who violates one or more of Chapter 142A’s requirements can be subject to both administrative and criminal sanctions. These penalties range from suspension of your registration to punishment of “up to $5,000 or imprisonment in a jail or house of correction for not more than two years” for a contractor who “knowingly, willfully, or negligently operates without obtaining a required certificate of registration.” See 201 CMR 18.04(4)(b).
Violations of Chapter 142A by a contractor or subcontractor are also per se “unfair or deceptive acts” within the meaning of the Massachusetts Consumer Protection Act, Chapter 93A. See Reddish v. Bowen, 66 Mass.App.Ct. 621 (2006). This means that if a contractor violated Chapter 142A, he may also face stiff Chapter 93A penalties, from double or triple damages, to even having to pay the homeowner’s attorney fees. Home improvement contractors who have not complied with Chapter 142A’s registration and contract requirements and later find themselves in a dispute with a difficult customer are, therefore, much worse off than if they complied with Chapter 142A.
What If You Aren’t Sure Whether Your Company Is Registered Or Your Contracts Comply With Chapter 142A?
If you have made it this far, you probably want to make sure you are doing everything you can to comply with Massachusetts law and to protect your company from potential liability. The first step is speaking with counsel to confirm whether your company needs to register as an HIC and that your company’s contracts meet Chapter 142A’s requirements.
What if, for example, your company is primarily a landscaping company that does some masonry? You may wonder if the occasional retaining wall you build will trigger Chapter 142A’s requirements. If you are a fencing company asked to build a customer’s storage shed, do you have to register? When was the last time your company’s contract form was reviewed by an attorney who specializes in construction contracts and is familiar with Chapter 142A and Massachusetts law?
Get in front of these issues before you find yourself on the wrong side of a dispute with a homeowner who is claiming you violated the Statute. As Benjamin Franklin said: “An ounce of prevention is worth a pound of cure.”
J. Nathan Cole is a Director at Kenney & Sams and has been representing construction contractors, subcontractors, and homeowners in Massachusetts for over a decade.
[1] “Residential contracting” includes the reconstruction, alteration, renovation, repair, modernization, conversion, improvement, removal, or demolition, or the construction of an addition to any pre-existing owner-occupied building containing at least one but not more than four dwelling units. See M.G.L.A. c. 142A, § 1.